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Much market speculation weighs on the anticipated action regarding key interest rates by the US Federal Reserve Bank and the effect it will have on market pricing of precious metals. Investors are also watching oil prices as well as the US dollar index, which has been trending stronger and putting pressure on gold for some time now. If oil prices drop as expected due to the build up in inventory, among other factors, it is likely to drag down other commodities as well, including precious metals. Here is today’s Weekly Market Report for Precious Metals.
Gold prices fluctuated within a narrow range during the week, closing at $1069.60 on the Comex, down $6.70 from last week and marking its fifth straight weekly loss.
While everyone awaits the Fed decision in mid-December, it is widely believed that a 25 basis point rate hike is already priced in. Now market watchers are eager to learn whether the Fed will present the presumed move as “once and done,” keeping rates unchanged for a considerable span into the future, or whether repeated small hikes are to be expected throughout 2016.
In spite of the repeated mention in the financial media of bearish factors in play, analysts are divided as to the direction of gold prices into next year. In fact, in a commentary for CNBC last week titled Here’s Why I’m Bullish on Gold, Peter Schiff, CEO of Euro Pacific Capital, concluded that “It’s a myth that higher interest rates are automatically bearish on gold,” highlighting this historic case for consideration:
“But for those who really believe that the Fed will take the unlikely path of serially raising rates into a weakening economy during an election year, it would be instructive to look at the performance of gold the last time the Fed raised rates. Beginning in June 2004, Alan Greenspan raised rates by 25 basis points for 17 consecutive meetings. During that entire two-year period, gold rose almost continuously, rising 62 percent (from $390 to $630) by the time the Fed stopped tightening.”
Silver prices appear to be settled just above $14 an ounce again this week. Early Monday pricing dipped slightly below that level but showed no sign of a significant drop. Should silver end up closing below $14 at the end of this holiday week, it may be a firmer signal for a downward trend at least in the short term.
Looking into 2016, John Whitefoot, editor at Lombardi Financial, points to four major catalysts that he expects to spark a rally in silver prices:
- -Silver is a hedge against economic uncertainty
- -Stock markets are seriously overvalued
- -Silver ratio points to upside growth
- -Dwindling supply of silver
With silver trading near the level of lows not seen since 2009, buyers are taking note that it is now in an attractive range as we near the end of 2015.
Platinum for delivery in January closed at $848.50, down $7.40, maintaining its current trend.
Earlier this year, forecasts for platinum prices into 2016 required repeated revision downward. Drops in demand from Chinese platinum jewelry purchasing, which comprises one-fifth of global consumption, contributed to this downward pressure. Revised forecasts were 12 percent below the average forecasts from a similar poll of analysts conducted three months earlier and the current price is below those forecasts. The consensus appears to be that platinum pricing will remain sluggish for a time, but with no severe downturn in sight.
Trading in all US markets will most likely slow as this week progresses, with the approach to the Thanksgiving holiday on Thursday.
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